Describe the firms decision at this price-output level

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Suppose that a perfectly competitive firm faces a market price $10 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue curve at an output (Q) level of 1,200 units. If the firm produces 1,200 units, its average variable costs equal $6.50 per unit, and its average fixed costs equal 0.50 cents per unit.

1) What is the firm's profit-maximizing (or loss minimizing) output (Q) level?

2) What is the amount of its economic profits (or losses) at this output level? What would be the firm's decision at this price/output level?

Reference no: EM13180213

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